Dell Dips Deeper into Retail with Wal-Mart 'Experiment'

The world's second-ranked computer manufacturer, Dell Inc., announced on Thursday that it will begin selling its PCs at more than 3,000 Wal-Mart and Sam's Club retail locations across the U.S. and Canada starting on June 10.

The world's second-ranked computer manufacturer, Dell Inc., announced on Thursday that it will begin selling its PCs at more than 3,000 Wal-Mart and Sam's Club retail locations across the U.S. and Canada starting on June 10.

Dell also plans on adding additional retailers to the mix in the UK, Germany, France, Japan, China, and Brazil later in the year, a spokesman told Reuters.

According to a Dell representative, the computer maker will offer two exclusive Dimension desktop systems at the U.S. Wal-Mart and Sam's Club stores, although he would not go into specifics about either. However, Roger Kay, principal at Endpoint Technologies, said the deal was a limited-time one, lasting only a week.

Wal-Mart confirmed that both systems will be sold in a "package bundle" with a sub-$700 price tag. The Canadian stores will carry different, exclusive models, the company said.

The move is an interesting one for a company that has traditionally relied on a flexible direct sales model through the Internet and phone. It was that model, in addition to selling machines at various mall kiosks, which helped the company's market share to skyrocket in the late '90s and left other OEMs struggling to compete on price points. Dell has made only one fray into the true retail space, opening a mall store in Dallas.

Recently, however, Dell has suffered from stagnant sales, as well as more competition from the likes of Hewlett-Packard, who recently overtook the company as the world's number-one computer seller. HP has embraced retail, although it also offers direct sales through its Web site.

In that vein, some see Thursday's announcement as way for the company to cautiously test some new waters without a full-fledged commitment.

"It's absolutely a limited trial," said Steve Baker, NPD Techworld's director of industry analysis, with regard to the deal. "Dell is a smart company moving into selling to third parties. It's a cultural change for them, a sea change."

Baker added that Dell will likely be testing those retail waters for a while in order to get a feel for what the retail channel is really like, what the benefits are, and whether it will eventually hurt or help them.

"They've indicated to me that it's a trial," Kay said.

But will selling PCs through a retail chain that's not exactly known for its high-quality electronics hurt Dell by diluting its brand? Maybe and maybe not.

"It's not really the direction I expected them to go," Kay said.

But, Kay said, all indications had been that Dell had been courted by virtually all of the big-name electronics retailers. "I don't know why they went this route," Kay said. "it could have been the deal, maybe they got really favorable terms. And Wal-Mart also has the widest distribution model."

In many ways, adding Dell PCs to the mix may be a worthwhile extension to that new strategy, benefiting both companies in the end. Just as Wal-Mart and Sam's Club can offer new retail opportunities, Dellas a well-recognized brandcould also give Wal-Mart's consumer electronics department a complimentary boost in reputation.

Wal-Mart was a good choice for [Dell] because typical electronics retailers, like a Best Buy or a CompUSA, might be a 'little reticent' in dealing with a company that's built its image on direct sales, Baker said.

"I think everyone's waiting to see what happens," Baker concluded. "Dell hasn't sold to the typical customer that goes to a Wal-Mart."

If the Wal-Mart experiment is successful, retailers should look for Dell to expand into more traditional electronics retailers, he said. But those retailers may attempt to use Dell as leverage to secure better deals. "Everybody is going to wait and hear what the rumors are on sell-through at Wal-Mart," Baker said.

Dell also has made strides in a variety of channels: the kiosks, the mall stores, as well as a new value-added reseller (VAR) program, Kay said. "I expect movement on all of these fronts," Kay said. "Call it the gatling-gun approach."